Spotlight on deforestation regulations in the UK and EU

In 2021, at climate COP26, global leaders committed to ending and reversing deforestation by 2030. In 2023, the Kunming-Montreal Global Biodiversity Framework (GBF) built on this by aiming to eliminate the destruction of biodiverse areas (such as forests) and ensure that at least 30% of degraded ecosystems are restored by 2030.

We are now halfway through the decade and are far from achieving this goal. Deforestation is not slowing down. It remains to be seen whether deforestation will feature in resumed biodiversity COP16 negotiations which are taking place in Rome next week.

Against this global backdrop, in this article, we examine the steps taken by the UK and EU to achieve this goal, namely the EU Deforestation Regulation and the UK’s Forest Risk Commodity Scheme, both of which are facing delays in implementation, and consider whether these measures go far enough.

Why we should care about deforestation

Rainforests – and deforestation – sit at the nexus between climate change, biodiversity loss, and social justice. 

Rainforests play a crucial role in regulating global climate and weather patterns by controlling the Earth’s carbon balance and water cycle. This is because rainforests are one of the world’s largest natural carbon sinks, with tropical rainforests alone sequestering (i.e. absorbing and storing) 7.8 billion metric tonnes of CO2 (25% of global GHGs) each year, and regulate the weather by releasing water vapour into the air, which in turn forms clouds, influences rainfall patterns, and helps cool global temperatures. If protected and restored globally, forests could mitigate up to 37% of the GHG required by 2030 to limit warming to below 2˚C by the end of the century.

Rainforests are also some of the most biodiverse areas on the planet, home to roughly 30 million plant and animal species (roughly 80% of the world’s terrestrial biodiversity) that humans depend on for medicine, food, water purification, soil stabilisation, and other ecosystem services. The livelihoods of 1.6 billion people depend on rainforests, although no humans are more rainforest-dependent than the Indigenous communities that have lived in harmony with them for thousands of years.

The destruction of rainforests via deforestation and forest degradation not only harms biodiversity and the lives of communities that depend on them, but also contributes to and accelerates climate change. This is because when a tree is cut down, it not only loses the ability to absorb carbon from the atmosphere, but in fact releases embodied carbon back into the atmosphere, transforming the tree from a sink to a source of carbon emissions.  The deforestation of roughly 10 million hectares of rainforest is responsible for 11% of global GHG emissions each year. This is more than the global emissions from aviation and cement combined.

We are dangerously close to reaching irreversible tipping points in our rainforests (tipping points are thresholds that, if crossed, could trigger the death of species and could turn rainforests into deserts).  Around 20% of the Amazon has already been deforested and a further 6% is “highly degraded”. Rainforest collapse could lead to catastrophic climate change, ecosystem collapse and the extinction of millions of species, which, in turn, leads to major disruption of the global economy.

Although the direct impact of deforestation is felt most acutely in the forest-rich Global South, in countries such as Brazil, Indonesia and the Democratic Republic of Congo, deforestation is a global problem that is indirectly caused by and impacts us all. Around 90% of deforestation is driven by land-use change to agriculture for the production of ‘forest-risk commodities’ including cattle, soy, palm oil, rubber, and wood, that are sold to global markets. In fact, deforestation can be traced via supply chain mapping to multinational corporations selling derivatives of these products into European, American and British markets, and several companies have already been sued for this reason (see below).

Global commitments to end deforestation

So, what have world leaders done about this?

In 2021, nearly 200 countries at climate COP26 committed to end and reverse deforestation by 2030. In 2023, at biodiversity COP15, they adopted the Kunming-Montreal Global Biodiversity Framework (GBF), which set 23 key biodiversity targets for 2030, including a target to reduce the loss of areas of high biodiversity importance to near zero and ensure that at least 30% of degraded ecosystems are under effective restoration by 2030. The guidance notes to the GBF targets highlight the connection between deforestation and biodiversity and emphasise the importance of sustainable forestry practices to achieving these targets.

Climate COP29 and biodiversity COP16 took place in close succession in Azerbaijan and Colombia respectively towards the end of 2024, and deforestation was a key topic for both conferences. For example, despite not being formally on the agenda, the COP29  ‘nature’ day  saw a high-level event on forests for climate, nature and people, in which Brazil’s Environment Minister emphasised the critical role of standing forests in combating climate change. Additionally, during the first week of the conference, the UK government pledged GBP 239 million to tackle deforestation.

Deforestation also featured at biodiversity COP16, which overran and did not conclude on time. For example, a draft decision relating to the topic of cooperation with other conventions and international organizations requested that the Executive Secretary “strengthen collaboration with the United Nations Forum on Forests and other relevant organizations, such as the International Tropical Timber Organization, and within the Collaborative Partnership on Forests, to support the coherent implementation of the United Nations strategic plan for forests 2017–2030”. There were also forest-related side events, including one on Biodiversity Conservation in Tropical Forests to Sustain Water Cycles hosted by the Global Forest Coalition.

Resumed negotiations under COP16 are taking place from 25-27 February 2025 in Rome, and deforestation, although not explicitly mentioned in the ‘key issues for resumed discussions’ may feature in negotiations. A major focus of the resumed session will be ensuring that the goals and targets of the GBF translate into tangible action, and we have seen above the important links between the GBF and deforestation. Additionally, the proposed focus on Indigenous peoples could also raise discussions around deforestation, not least due to the cultural and historical connections between Indigenous peoples and forest ecosystems and the significant impacts deforestation has on these groups.

What steps have the EU and UK taken to tackle deforestation?

The Europe and the UK are significant consumers of commodities typically linked to deforestation, such as soy, palm oil, rubber, wood, livestock (particularly cattle), and more. For example, EU consumption (mostly of soy and palm oil) accounts for roughly 10% of global deforestation. Both the EU and UK have passed laws to address deforestation in companies’ supply chains, but both frameworks are currently subject to delays in implementation. With only five years left to achieve our collective 2030 targets, the question remains over whether these laws will go far enough.

The EU Deforestation Regulation

The EU passed the Deforestation Regulation (EUDR) in June 2023. As a regulation, the EUDR will be directly enforceable in all EU and EEA countries.¹

What commodities does it cover? The EUDR covers seven commodities – cattle, coffee, oil palm, rubber, soy and wood – and derivative products of each, such as meat products, chocolate, coffee, leather, palm nuts, rubber products, soybeans, paper, pulp, books and more.² The EUDR applies to goods produced on or after 29 June 2023, with the exception of timber and timber products, which are in scope if produced before 29 June 2023 and placed on the EU market from 31 December 2028, and goods produced entirely from materials that would have otherwise been discarded as waste.

Who does it apply to? When in force, the EUDR will apply to all EU companies importing or exporting products that contain, have been fed with or have been made using these commodities. Companies that directly import or export these commodities are called "operators” and those further down the supply chain distributing them are called "traders".  Provided such companies have a registered office, headquarters or permanent business address in the EU, their size (typically measured by turnover and employee thresholds) is not relevant to them falling in scope.

What does it prescribe? The EUDR aims to ensure that products placed on the EU market are not linked to deforestation or forest degradation. It places extensive requirements on companies to demonstrate that their products are deforestation free. Companies that are in scope must:

• Exercise enhanced supply chain due diligence to ensure that products they sell within the EU are deforestation-free (i.e. not linked to deforestation or forest degradation). This consists of three parts: 
  • Information gathering: companies must collect information about the supply chain and origin of commodities.  The relevant information to be obtained includes the quantity of products, country of production, location of plots of land where products were made, and name and contact details for traders who supplied products. 
  • Risk assessment: companies must evaluate the information collected to assess the risk that the products are associated with deforestation, forest degradation, or illegality, including human rights.
  • Risk mitigation: companies must take steps to mitigate those risks through independent audits or field checks if necessary.
• Complete and submit a due diligence statement to competent authorities (as designated by each Member State) outlining their compliance with the EUDR and explicitly confirming that products are not sourced from deforested land or have contributed to deforestation after 31 December 2020.
• Not place products on the EU market or export products that are linked to deforestation or illegality (i.e. have not been produced in accordance with relevant legislation of the country of production).

What are the liability risks? Companies that fail to comply with the EUDR risk facing penalties including:

• Fines proportionate to the environmental damage and value of the items, with a maximum of at least 4% of EU-wide turnover in the prior financial year; 
• Confiscation of products and revenues gained from the items;
• Temporary prohibition from public procurement and public funding; and
• Temporary prohibition from placing or making products available on the market.

Where do things stand now? The EUDR was originally intended to apply from 30 December 2024 for medium to large businesses, and from 30 June 2025 for micro or small businesses. However, the regulation faced significant political pushback and concerns raised by EU Member States, non-EU countries, traders and operators around challenges implementing the EUDR requirements and fears of non-compliance and liability risk. This included a claim filed by a German cocoa trader against the EUDR in German courts citing concerns about the clarity of its provisions and the associated administrative burden and claiming that the EU regulation requires evidence which A&D simply could not fulfil and that would be disproportionate.

On 17 December 2024, the European Parliament confirmed it had reached a last minute provisional agreement with the Council of the EU and EU Commission (see the text of the agreement here) that extended the deadline for compliance until 30 December 2025 for medium to large businesses and 30 June 2026 for micro and small businesses. The delay will give companies and national authorities more time to prepare for implementation and establish the enhanced due diligence system for all relevant commodities and products in their value chains.

Will UK companies be in scope? The EUDR will, of course, not apply directly to the UK, but UK companies may be in scope of if they import or export products into/from the EU market that contain, have been fed with or have been made using the relevant commodities.

The UK’s Forest Risk Commodities Scheme

The UK has also taken steps to combat deforestation in companies’ supply chains. In 2021, during the UK’s COP26 presidency, the UK enacted the Environment Act 2021, which aims, amongst other things, to tackle deforestation in UK supply chains. The relevant provisions are set out in Schedule 17.

What does it prescribe? Schedule 17 of the Environment Act introduces three core requirements for in-scope businesses:

1. It prohibits companies from using illegally produced “forest risk commodities” in their UK commercial activities, including both raw and derived products.

2. It requires companies that use forest risk commodities (or products derived from forest risk commodities) to establish and implement a due diligence system for each regulated commodity. The due diligence system should:

(a) identify, and obtain information about, the commodity;

(b) assess the risk that relevant local laws were not complied with in relation to that commodity; and

(c) mitigate that risk.

3. It requires companies to report annually on their actions taken to establish and implement the due diligence system. To ensure transparency, parts of their reports will be published.

What commodities does it cover? “Forest risk commodities” refer to the commodities in scope of the regulations made by the Secretary of State. In December 2023, the former Government announced that the Forest Risk Commodity Scheme would apply to soy, cocoa, palm oil, cattle products (excluding dairy), and products derived from each of them. This is narrower in scope than the EUDR as it does not include coffee, rubber or wood. Furthermore, commodities covered by Forest Risk Commodity Scheme must be produced from a living organism (e.g. plant or animal), so commodities such as ores, even if the mine was on illegally deforested land, will not fall in scope.

Who does it apply to? The Forest Risk Commodities Scheme is intended to apply to “regulated persons” in respect of forest risk commodities. Schedule 17 sets out that ‘regulated persons’ are organisations that carry out commercial activity in the UK and meet the conditions as to turnover as specified by the regulations made by the Secretary of State. The definition also extends to subsidiary undertakings. In its December 2023 announcement, the former Government set the turnover threshold at a global turnover of over £50m. It also specified that businesses using 500 tonnes or less of each commodity a year could apply for an exemption. This is similarly narrower in scope than the EUDR, which applies to companies irrespective of their size.

What are the liability risks? The Government has said that it will introduce “a wide array of sanctions” for contraventions of the legislation, including reporting failures. Schedule 17 provides for the imposition of civil sanctions (including fixed monetary penalties, discretionary undertakings, stop notices and enforcement undertakings) for failure to comply with the regulations. It also allows for provisions imposing criminal sanctions (punishable with a fine) for:

(a) failure to comply with civil sanctions imposed; or

(b) obstruction or failure to assist an enforcement authority.

Where do things stand now? Schedule 17 requires the UK Government to particularise the requirements of the Forest Risk Commodity Scheme in secondary legislation. A consultation took place in 2021-2022 and the former Government published the proposed scope of the regulations in December 2023, but set no timetable for implementation. The new Labour Government has confirmed its commitment to the Forest Risk Commodity Scheme, both in its manifesto and in post-election communications, suggesting that secondary regulations may be on the horizon. To date, however, nothing has been published.

Wider trend of supply chain due diligence – and backlash

The EUDR and the UK Forest Risk Commodity Scheme are part of a new type of laws that impose enhanced supply chain due diligence obligations on companies, an area of corporate practice that was previously governed by voluntary and non-binding frameworks such as the OECD Due Diligence Guidance for Responsible Business Conduct, ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy and United Nations Sustainable Development Goals.

Such laws include the:

• French Loi de Vigilance, which was passed in March 2017 and requires in-scope companies to establish a vigilance plan to identify the risks associated with their business and prevent human rights violations and environmental impacts;
• German Lieferkettensorgfaltspflichtengesetz (LKSG), which was passed in July 2021 and imposes due diligence obligations on in-scope companies to safeguard human rights and environmental standards in their supply chains;
• EU Corporate Sustainability Due Diligence Directive (CSDDD), which was passed in May 2024, after a highly politicised process and requires in-scope companies to undertake mandatory human rights and environmental due diligence (known as “mHREDD”) on their entire value chains. The CSDDD will start to apply for the largest companies in scope from 2027; and
• EU Batteries Regulation, which was passed in July 2023 and, amongst other things, imposes due diligence obligations on in-scope companies to identify, prevent and address human rights impacts and environmental harm in high-risk supply chains across the entire battery lifecycle.

Although the precise scope of these laws differs, they all impose far reaching and demanding due diligence obligations on companies, requiring in-scope entities to map their entire operations and supply chains to identify, prevent, mitigate and address any adverse human rights and environmental impacts.

This will be a difficult task for many companies, particularly SMEs and/or those with long and complex supply chains. At least initially, compliance may be cost and time intensive. The strong political and business opposition to both the CSDDD and the delayed EUDR demonstrate the scale of the challenge.

Race against the clock

Current estimates show that the world is significantly off-track to meet the 2030 target to end and reverse deforestation. To achieve the 2030 deforestation goal, supply chains for the key forest-risk commodities should be deforestation and land-conversion free by 2025. To be deforestation and land-conversion free, a supply chain must not contain forest risk commodities that originated from a plantation, farm, ranch, or forest management unit on which conversion from forests or other natural ecosystems occurred after a specified cutoff date.³  However, in 2024, only 0.3% of cocoa and 4.5% of soy products entering the UK food retail value chain were deforestation and land-conversion free.

Litigation risk

Although the current delays to EUDR and UK Forest Risk Commodities Scheme may provide some comfort to in-scope companies, they should not be complacent and would be well advised to use the extra time to develop robust due diligence procedures and documents to ensure compliance when the regulations kick in.

In addition to regulatory penalties and enforcement action for non-compliance prescribed by the EUDR and UK Forest Risk Commodity Scheme (see above), companies face a growing threat of litigation risk around incomplete or inadequate due diligence and/or adverse impacts identified in their supply chains.

Such cases have already been filed against companies for deforestation in their supply chains:

• In March 2021, eleven NGOs sued the French supermarket chain Casino under the 2017 French Loi de Vigilance over products sold in its supermarkets connected with deforestation in the Amazon caused by cattle farming. The NGOs allege that the yearly vigilance plans released by the supermarket chain, in accordance with the Loi de Vigilance, lacked substance and/or applicability.
• In December 2022, an OECD complaint was filed before Italy’s National Contact Point (NCP) for the OECD against the leather company Pasubio for sourcing leather from tanneries, which are allegedly linked to illegal deforestation of land of the Indigenous Ayoreo tribe in Paraguay.

Due diligence-related cases elsewhere also demonstrate the growing focus on companies’ supply chains. For example:

• In June 2024, the UK Court of Appeal ruled that the UK National Crime Agency’s (NCA) refusal to investigate whether cotton goods imported from China’s Xinjiang Uyghur Autonomous Region were the product of forced labour or other human rights abuses was unlawful. The decision was then remitted to the NCA for reconsideration.
• Similarly, in October 2022 , two NGOs brought a claim against BNP Paribas under the French Loi de Vigilance in relation to BNP Paribas’ financing of companies allegedly responsible for the deforestation of the Amazon and violations of human rights. Such cases are likely to increase as supply chain due diligence requirements grow.
• In December 2022, a claim was filed against the London Market Bullion Association by the families of two men killed at a gold mine in Tanzania by security forces, alleging that the gold regulator wrongly classified gold from the mine as responsibly sourced, despite allegations of human rights abuses in the supply chain. The claim raises the legal issue of whether certification bodies can be held legally responsible for flawed due diligence and certification processes which allow minerals tainted by human rights abuses to be traded.
• In June 2024, a dedicated chamber of the Paris Court of Appeal handed down its first three decisions under the French Loi de Vigilance in cases seeking accountability for failures in human rights and environmental due diligence. Although a claim against SUEZ was dismissed, the Court allowed claims against EDF and TotalEnergies to proceed. The claim against EDF asserts that the French energy company failed to respect an indigenous community’s right to free, prior and informed consent when developing a wind farm in Mexico, and the claim against TotalEnergies alleges that the French energy company violated the Loi de Vigilance by failing to take the necessary measures to comply with the 1.5°C targets in the Paris Agreement.

Such cases demonstrate the growing liability risk to companies arising from inadequate due diligence in their supply chains.

To prepare for compliance, companies should:

• Invest in supply chain audits and robust due diligence systems to improve their understanding of their supply chains and be able to identify and prevent any adverse impacts, including deforestation;
• If applicable, utilise the results of double materiality and risk assessments under the EU Corporate Sustainability Reporting Directive (CSRD) as many of the impacts identified therein will be relevant to deforestation;
• Track trends in deforestation and supply chain litigation to identify any emerging areas of liability risk; and
• Seek legal advice to clarify their understanding of the law and liability risks.

1. The EUDR text is expressed as a “text with EEA relevance”, which means that it will also be applicable to EEA states, provided that it is incorporated into the European Economic Area (EEA) Agreement. To be incorporated into the EEA Agreement, the EUDR will need to be approved by the EEA European Free Trade Agreement (EFTA) and the EEA Joint Committee. The EUDR is currently being scrutinised by the EEA EFTA. For an overview of the review process for the EUDR, see: Factsheet - 32023R1115 | European Free Trade Association.
2. For a full list of the relevant commodities and products, see Annex I of the EUDR.
3. Deforestation- and conversion-free supply chains and land use change emissions: A guide to aligning corporate targets, accounting, and disclosure, Accountability Framework, p. 37.